According to RP Data’s monthly house price index, house prices in Australia have suffered their largest monthly fall in five years with the budget being blamed for a drop in consumer confidence.
Prices fell in six of the eight capital cities in May, with Melbourne recording the biggest drop at 3.6% and approvals for the construction of new homes nationally falling by 5.6% in April.
Craig James, CommSec’s chief economist indicated that the federal budget may have been the catalyst for a pause after a year of rising prices.
“Home prices couldn’t lift forever. At some point there had to be a correction and it seems the federal budget caused people to pause and take stock,” he said.
Tim Lawless, research director for RP Data said that seasonal factors also played a role in slowing inflation in the property market.
“Historically, housing market conditions have softened in April and May as the market rebalances from what is typically a seasonally strong first quarter,” Lawless said.
“We have been seeing signs that the housing market is at or approaching the peak of the growth cycle.“
RP Data’s index of Australian capital city home prices show that values fell by 1.9% in May, the largest monthly fall since December 2008.
There were only two cities bucking the national trend, Darwin and Canberra, with prices adding 1% and 0.1% respectively.
ANZ’s senior economist, Justin Fabo spoke of his disappointment in the April figures for new building approvals.
“Most of the fall was in apartments, but even approvals for stand-alone houses have softened,” he said adding that, “we’ve still got a lot in the pipeline in terms of construction activity but the approvals numbers are saying that at some stage, the growth in that construction activity is likely to slow up unless approvals start to pick up again. The question is now how much it slows.“
The dwellings category including apartment blocks and townhouses, fell 14% in April after a 10.1% fall in March. Approvals for private sector houses fell 0.3% in the month, but were up 16.5% in the year to April.